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Swaziland: Reducing Poverty Through Shared Growth

Swaziland FY00 PA

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PART A. Confronting the Challenge

I. Introduction

The people of Swaziland are its greatest resource. Yet social and economic indicators of household welfare converge to confirm fundamental inequalities in access to incomes and assets, and the existence of significant poverty and deprivation. Furthermore, as the regional economic and social climate is transformed, the fragile gains of the past are being fast eroded. At this historic juncture, the Swazi poor need to come to the fore of the public policy framework. There is an urgent need—and an opportunity—to catalyze a new pattern of pro-poor development in Swaziland where the poor participate and share fully in growth, human development and social protection.

Policy framework: Many of the policy actions required to reduce poverty have already been identified and embodied in Swaziland's National Development Strategy (NDS). A poverty reduction strategy in Swaziland means prioritized implementation of NDS policies.

Focusing on the poorest groups: The study focuses on the poorest 40 percent of the population (the poor) and the poorest 20 percent (the core poor).

II. The Limits of Narrow Growth

High growth in the past, but stagnation at present: The Swazi economy performed strongly during the 1980s, but over the past seven years, average real GDP growth has hovered close to the population growth rate estimated at 2.7 percent by the 1997 Census. In other words, real per capita incomes have remained virtually stagnant in the mid-1990s. Moreover, it is estimated that Southern Africa Customs Union (SACU) receipts—which have supplied about 50 percent of Swaziland's total government revenue—will drop by as much as 8 percent of GDP beginning around 2000/01, underlining the need for deliberate Government action to promote fiscal allocations which are pro-poor.

The gains of the high growth has not benefited everyone equally: In fact, the pattern of concentration in wealth and incomes indicates that only a small share of the population have garnered most of the national income. Analysis of the national income distribution from the 1995 SHIES shows that the richest 10 percent of the population control almost 40 percent of the total incomes in Swaziland. In sharp contrast, the poorest 40 percent of the population control only 14 percent of total incomes. Inequality is high in both rural and urban areas.

By any measure, poverty in rural Swaziland is worse than in urban areas: Approximately 43 percent of the rural population fall below the national upper poverty line (UPL), while about 30 percent of the urban population are poor. The depth and severity of poverty are also worse in rural Swaziland. Moreover, rural areas have a greater share of the poor (84 percent) than they have of total population (79 percent). Not only is a rural Swazi more likely to be poor—and in deeper poverty—than a Swazi living in town, but the majority of poor people reside in rural Swaziland. Within rural areas, the worst poverty levels (all indices) are found in rural Shiselweni region. In rural Shiselweni, more than half the population live in poverty.

Poverty in Swaziland is indeed characterized by a strong rural dimension, but the vulnerability of the urban poor cannot be overlooked. In fact, the share of the population of the large gazetted towns who live in poverty (40.6 percent) is almost as high as the share of rural Swazis in poverty (42.8 percent).

Labor is the Poor's Major Asset: Given the inequality in ownership of physical assets observed above, the major asset available to poor households is the quantity and quality of their labor power. The greater the imbalance of dependents to labor-force participants, the greater the chance of the household being in poverty. Yet adequate quantity of labor-power alone is not sufficient to prevent the household from being poor. There needs to be sufficient labor market demand to absorb the continuous new entry into the labor-force and households must be able to invest in the skills for which there is market demand. Unfortunately, in the mid- and late-1990s unemployment in Swaziland has been in excess of 20 percent and rising as job-creation fails to keep pace with high population and labor force growth. For the age group 15-24 years, the problem is acutely worse, with national unemployment levels above 40 percent. And it is estimated that over 40 percent of the core poor are unemployed.

Migrant labor opportunities have declined: As unemployment in South Africa rises, migrant workers from neighboring countries such as Swaziland find it increasingly difficult to find employment and are returning to their home countries. In 1990 there were over 16,500 Swazi migrant workers employed in South African mines compared to about 13,000 in 1997. Labor income from Swazi mine workers fell from being equivalent to 13 percent of GDP in 1990 to only about 6 percent of GDP by 1995-1997. Furthermore, the slowdown in foreign direct investment (FDI) has also led to stagnation in employment in the urban economy and the title deed land (TDL) sector. The duration of urban unemployment episodes is likely to have increased, as have pressures on the urban informal sector to absorb new entrants and lay-offs from the formal sector.

Levels of growth need to be high and the pattern equitable to reduce poverty: Estimates show that a unit reduction in inequality would have as great an impact in reducing poverty as a unit of inequitable growth. Additionally, an estimate was made of the minimum rate of national income growth that is needed to reduce the total number of the poor, if inequality remains unchanged. Under an assumption of 2.7 percent per annum population growth rate, Swaziland requires a minimum growth rate of 5 percent per annum in real GDP, or a growth rate of 2.3 percent per annum in real per capita GDP, in order to prevent the numbers of the poor from rising. This is clearly cause for concern. The actual real per capita GDP growth rate in Swaziland has stagnated around 0 to 1 percent in recent years. Furthermore, GDP growth projections for Swaziland in the short term are not very optimistic and are placed currently around 2 percent per annum by the World Bank. This is far below the minimum target growth rate required for reducing the numbers of the poor.

These estimates tend to confirm, first, that the number of poor people in Swaziland have increased at least since the mid-1990s; second, to have a realistic chance of reducing poverty, high growth rates are necessary at a time when Swaziland faces a crisis of economic prospects; and third, ensuring that the new sources of growth are sufficiently broad to be accessible to the poor—and indeed to focus on the poor—is essential.

Labor-intensive growth is needed: The high growth and foreign investment in-flows Swaziland has experienced in the past has not benefited the poor. Furthermore, as these historical sources of growth have been drying up due to permanent shifts in the regional context, poverty in Swaziland is likely to have deteriorated considerably. The deterioration will continue unless measures are taken to pursue a growth strategy that draws on its potential long-term comparative advantage. The analysis demonstrates that the emphasis on labor-intensity is crucial if the poor are to share in the benefits of growth. One major option in this regard is the hitherto neglected Swazi Nation Land (SNL) agricultural sector.

Labor-intensive SNL agriculture has significant growth and poverty-reduction potential: The small plots under present yields and methods of cultivation cannot provide much increased income to supplement declining wage earnings. In order to increase earnings from farming, households may find it advantageous to switch to higher valued crops, such as market vegetables or perennial products, instead of cultivating predominantly maize, as at present. Those who stay in maize can also achieve higher yields than at present.

Research elsewhere in Africa has produced evidence that the growth potential from smallholder commercialization and exploitation of comparative advantage can also generate considerable multiplier effects on local incomes. As more small farmers commercialize they create demand for small farming implements, hired labor (backward linkages) and trading services, small transport, local consumer goods, and so on (forward linkages) which stimulate local labor demand. Both the initial and subsequent rounds of growth through demand linkages are labor-intensive and can be accessible to poorer households.

Major constraints to raising SNL agricultural productivity persist: SNL households have demonstrated dynamism in their modification of survival strategies under numerous constraints. Yet, the diversification into high-value cash crops by SNL farmers continues to be very limited due to a number of factors that impede investment and growth in productivity:

  • Land rights are insecure. Under traditional land tenure arrangements, chiefs traditionally have the power to withdraw land rights. Insecurity of property rights over land can be important deterrents to productivity-enhancing investments Swazi farmers may be inhibited from investing in their land for fear of losing it.
  • Under an open-access grazing system, cattle are allowed to graze in excess on SNL common pasture at no direct cost to the cattle-owning household, while Government dipping services and most other veterinary services are provided free. Ministry of Agriculture and Cooperatives (MOAC) predicts that these grazing systems will sooner—rather than later—lead to levels of soil erosion and land degradation that will undermine the sustainability of farming systems.
  • Access to capital is expected to be a severe constraint for most SNL farms in moving into irrigated agriculture. Various features of the formal financing system tend to exclude poorer smallholders from accessing financing for irrigation. Most importantly perhaps, the disincentive to invest in irrigation is high without secure tenure to land.

III. Poor Quality of Human Development Investments

The ability of the poor to participate in labor markets—and the returns they earn from such participation—is closely linked to the quantity and quality of their human capital. The success of human development policy in reducing poverty depends largely on the extent that public expenditures on education and health enable the poor to obtain affordable and good quality education and health services.

Allocations within health and within education are not pro-poor: Despite a substantial allocation of the public budget to these sectors, Swaziland's education and health indicators are worse than expected, and the disparities are greater for the poor, in rural areas, and for women. The analysis indicates that the allocation of public expenditures within each sector is biased against the basic service levels utilized by the poor. The consequent under-funding of primary education and health services combines with an inefficient allocation between wages and other essential items to generate a poor quality of services available to the poor. Major re-orientation is needed in both sectors.

One of the highest HIV/AIDS prevalence rates in the world: Over 18 percent of the total adult population are HIV positive. AIDS is undermining many gains of the past. As a consequence of the epidemic, it is estimated that the average life expectancy in Swaziland has fallen from 57 years in 1996 to about 39 years at the end of the century, rolling back much of the gains in the last thirty years. The pressure to protect—and increase—social sector spending in the most equitable and efficient manner is thus critical in Swaziland.

Public expenditures within the health sector are inefficient and biased against the poor: There is high exposure for the poor to water-borne disease given that about 62-63 percent of the poor and extremely poor people in rural areas must rely on rivers as their principal source of drinking water. Despite much of the country's disease burden being preventable, public health expenditures are skewed toward curative care. Only 20 to 30 percent is allocated to primary/preventive care, likely to be used mostly by the poor, whereas curative medical services tend to cater to the needs of the well-to-do in Swaziland. Strong urban bias is also evident in the distribution of health services and facilities. This results in rural clinics—to which the poor have greater access—being underserved.

Education level is strongly related to poverty status: Country-wide, over 50 percent of the people who live in households headed by people with no education, live in poverty. In contrast, the poverty ratio is halved for people in households whose heads have obtained some secondary education. This suggests that higher incomes are related to more education and that ensuring affordability of primary and secondary education for the poor is thus an investment with high returns for society and the household.

But the poor are less able to afford education: Despite aggregate improvements in education indicators in Swaziland over the past two decades, education levels attained by the Swazi poor are much worse than that by the non-poor. For the poor in Swaziland, sustaining school attendance and obtaining quality learning may be a much larger issue than that of gaining initial access. It takes an average of 13 years to produce a primary school graduate in what should take 7 years, and repetition and drop-out rates are thought to be higher for the poor than the non-poor. These high repetition rates are due to poor quality, efficiency and high cost. By addressing these issues, Government could obtain a savings of 84 percent on primary education and also substantially reduce costs for households, especially the poor.

Public education subsidies are biased to the tertiary level: Under the current structure of spending in the sector, the public cost (subsidies) to educate 1 university student in 1995/96 would have been sufficient to cover the cost of educating 47 primary or 13 secondary school students. These ratios are very high in any international context. Yet the poor often cannot keep their children in school through the primary and secondary levels to reach the tertiary tier. Improved equity and efficiency in public education spending will lead to better outcomes—at a lower cost—for both poor households and the Government.

IV. High Risk and Vulnerability

Informal insurance exists but does not provide effective protection: To protect against community-wide and individual shocks, Swazi households and communities have developed informal insurance mechanisms on the basis of social norms and mutual exchange. These informal safety net mechanisms—whilst often being the only mechanisms accessible to the poor—do not necessarily provide effective protection. SNL farms, for example, are highly vulnerable to droughts when the capacity of both recipient and donor households are overwhelmed. Social institutions, moreover, may not necessarily be equitable. The poorest households can be marginalized from community institutions, such as women's groups (luholiswano). And the cumulative impact of the HIV/AIDS crisis is undoubtedly undermining the extended family support network.

Recurrent drought has severe effects on the poor: During the historic drought of 1991/92, SNL maize production fell dramatically from 145 thousand metric tons in 1990/91 to 54 thousand metric tons in 1991/92. The poor, who have few assets, are hit even worse than aggregate figures may convey. And as droughts become more frequent, the assets of households have less time to recover between each episode.

HIV/AIDS is a national, ongoing crisis: Swaziland has one of the world's most severe HIV/AIDS epidemics. The country is losing a large segment of its young, highly skilled workforce. About 60 percent of HIV infections in Swaziland occur among those 20 to 39 years old, one of the most productive segments of society. Both the poor and non-poor are vulnerable to HIV but the poor are least able to cope with the illness and associated costs. Moreover, AIDS can often result in the increased impoverishment of households through cost of treatment, lost adult income and assets, funeral expenses, etc. Multigenerational households that lack the middle (income-producing) generation are increasing, and AIDS often kills more than one breadwinner and/or caretaker in a family.

Gender disparity in legal rights: exacerbating women's vulnerability: In both the indigenous customary law and the Roman-Dutch common law systems governing Swaziland, women are considered minors. This means that women—in law, and often in practice—do not control or own major assets, particularly land. This fundamental imbalance in the property rights of men and women leads to gender differences in the pattern of poverty. De facto female headed households (i.e. where a male co-head is nonresident for large parts of the year) have the highest core poverty levels of any household type.

V. Accountability, Information and the Poor

A more coordinated approach to local development efforts—based on accountability of local government structures to the community and better monitoring of poverty information—is essential for improving economic management and poverty reduction efforts.

The Tinkhundla system does not have clear mandate, budgeting or reporting structures: Line ministries do not necessarily maintain a common structure of personnel at the decentralized level. Even when there are personnel at the level of an inkhundla, there is no structure that compels these departmental representatives to coordinate their activities at the level of the inkhundla. Reporting structures of the agencies continue to be vertical within the parent agency, with little emphasis on horizontal coordination at the local level. In many chiefdoms there are no women in the decision-making inner council and only one or two women in the development committees.

Poverty information is very limited: The Government, NGOs, donors, and others have identified the lack of data on poverty trends and their determinants as a major constraint to establishing greater poverty focus in policy formulation. There is also no clear institutional framework for coordinating data generated by different institutions. Such data and an institutional structure to channel information to policy-makers and community organizations could facilitate social debate and prepare the groundwork for enacting reform.

PART B. Priorities for Action

VI. Outlining A Poverty Reduction Strategy

Some basic themes: A new, equitable and dynamic pattern of growth and human develop-ment is required for a serious poverty reduction agenda in Swaziland. Unless public action is undertaken to remove major structural constraints to labor-intensive development, however, livelihoods are expected to continue stagnation and poverty to worsen further. The analysis of poverty in this report can be used to identify priority areas for action. This agenda for reform will require courage, vision and sensitivity on the part of the country's leaders. Basic themes of a poverty reduction strategy for Swaziland are proposed below:

  • Enabling the Growth of Smallholder Agriculture: Smallholder SNL agricultural commercialization will need to be a central element of the poverty reduction and growth strategy of Swaziland. This emphasis is consistent with Swaziland's comparative advantage in labor-intensive sectors and location near a major port. There is scope for expansion, diversification and intensification to access export markets, through commercialization of SNL agriculture into high value crops such as vegetables, perennials, etc. and through the related multiplier effects and demand linkages. The capacity of rural areas to augment incomes is expected to increase, reducing pressures on urban labor markets and services. Focusing public efforts on removing impediments to agricultural growth on SNL is thus a priority for reducing poverty in all of Swaziland. This bottom-up development approach is critically contingent, however, on catalyzing and protecting investments for small farmers on Swazi Nation Land. This requires:
1) rural land tenure reform to assure more secure property rights to small farmers;
2) promoting more sustainable cattle grazing management; and
3) promoting small-scale financial savings and credit mechanisms in rural areas.
  • Yet SNL growth—however labor-intensive—is not a panacea to the unemployment and poverty problem. There is need to build the labor absorption capacity of the economy as a whole by promoting choice of labor-intensive techniques in production (e.g. by increasing the cost of capital by removing implicit subsidies) and the growth of other labor intensive sectors for which there may be export demand. Promising areas could be identified in collaboration with regional investment partners.
  • Ensuring Effective Human Development Investments: The better health and strong basic education of its people are among the most productive assets in which a country can invest. To facilitate higher productivity of labor, lower fertility and greater mobility of labor in these changing labor markets, the quality, relevance and affordablity of basic education and health—levels of service most accessed by the poor—needs to be improved. A structural shift in the public spending pattern is needed to focus on primary and secondary education levels rather than academic tertiary levels, and on preventive, core health services rather than curative services. Priorities should focus on:
1) prioritization of education spending towards quality and efficiency at primary and secondary levels;
2) improving skills matching to labor market needs;
3) expanding early childhood development programs for poor communities; and
4) emphasizing a primary and preventive health service.
  • Insuring the Poor against Major Risks: Swaziland's poor continue to be highly vulnerable to major shocks and to be locked in poverty traps because of excessive uninsured risk. Public action needs to be selective, preventive and targeted where possible to reduce the economic vulnerability of the poor to the major risks. A public social protection program with the following priorities could have the most cost-effective impact in reducing the vulnerability of the poorest of the poor in Swaziland:
1) cross-sectoral, multi-level response to AIDS;
2) drought preparedness;
3) legal reform to provide equal rights to women; and
4) safety nets which are primarily work-based and self-targeted.
  • Strengthening Institutions to Increase the Poverty Impact of Policies: Finally, the speed and effectiveness with which the public policy framework can orchestrate this transformation can be improved by governance structures which are accountable to communities and with ongoing monitoring and evaluation of the ways in which growth dynamics are affecting the poor—both positively and negatively. Priority should be attached to:
1) institutional mechanisms which ensure poverty planning at central level;
2) local level coordination and community participation; and
3) establishment and use of a poverty monitoring and analysis system.

Looking Forward

As economic and human development opportunities are oriented towards the poor, a virtuous circle of broad growth and poverty reduction is envisaged. But the achievement of this will require fundamental change across sectors and leadership to carry forward the change .